What are the geo-political issues that will arise in 2018?
There are few aspects we have to take into consideration:
- Korean Crisis;
- US new geopolitical approach;
- China internal and external policies;
- Middle East transformation;
- European Union fragmentation;
- Africa;
- Russia;
- World-changing technologies;
The Korean crisis
North Korea already crossed all red lines imposed by Washington. Because of the South Korean resistance of a preemptive military strike against the North was avoided during 2017. I expect this situation to continue in 2018, some cyber attacks against the North may be possible.
However, the Korean crisis will not be solved in 2018 will only grow in its concerns. The most challenging aspect of the crisis is how to secure the nuclear weapons of the DPRK in case of a conflict. Whether North will use its nuclear weapons as a final attack against Seoul, whether the regime will collapse itself and in this scenario most probably those weapons will be sold on the black market rising concerns in the Middle East.
The US new geopolitical approach
One of the main aspect that the current administration finding a smart way how to influence different parts of the world without relying on its own military, but on trustful allies. Due to the failed Afghanistan and Iraq campaigns, the US understands now that the only option is to build strong alliances and influence the region relying on third parties. The US-Saudi military contract signed by president Trump is a part of this new approach.
Regarding trade, the US will become more aggressive toward China, Japan and perhaps Europe. Trump’s nationalistic policies supported by many Americans will have a considerable influence in international trade during his administration.
China internal and external policies
President Xi consolidated its power in 2017. Internally, China political landscape it’s a struggle between two main factions of the Communist Party, Xi Jinping, and Jiang Zemin. The last one almost lost the battle within the party. The current president Xi dominates the Party, the Military (which in China it serves the Party, not the country itself) and the economy. For example, since Mao, Xi Jinping is the only Chinese leader who has its name written in the Constitution.
With a more consolidated power Xi Jinping will dominate China foreign policy in 2018. And here things become more interesting. In the last 30 years, China foreign policy was highly balanced and neutral despite the fact it is the country with the most territorial disputes in the world. The main Chinese geopolitical problem is the fact it is a rising power without real allies. In its neighborhood, it is unlikely to make alliances because many countries see China as a dominant power. Overseas, China will try to make partnerships with Panama, Argentina, Venezuela, Angola, Mozambique and perhaps Mexico. Regarding relations between China and Russia, the US and Korean crisis have a vital role here. China and Russia will become closer only if the US will push its containment policy towards unfriendly regimes in Asia. Currently, the US is making partnerships with former enemies such as Vietnam. The majority of South-East Asia countries are somehow under American influence. This is basically containment strategy, the same strategy is applied against Russia in Eastern Europe. Regarding nuclear threat from North Korea, both China and Russia are concerned about the anti-missile equipment deployed by the US in the region. The same equipment can work against Chinese and Russian ICBMs. From this military perspective only, China and Russia could become closer.
China’s approach toward DPRK is very different in practice than what they say publicly. Theoretically those two countries are allies, in fact, Kim Jong Un started an internal campaign against Chinese influence in its inner circle of power. An example is the execution of Jang Song-Thaek, Kim’s uncle in 2013. With him, a lot of pro-Chinese officials were eliminated from the power circle. Kim feels threatened by a Chinese backed coup against his regime. With a lot of pressure from Trump on China to solve the Korean crisis, this scenario is more plausible than ever before. In reality, China is not willing to defend DPRK but also is not willing to lose it as a buffer zone.
Middle East transformation
Saudi Arabia’s anti-corruption purge is all about life after oil. Saudi Crown Prince Mohammed bin Salman’s decision to arrest scores of the country’s most prominent officials and business elites under the banner of an anti-corruption purge last year was a very powerful move. First in this way his consolidate its power both internally and externally. Al-Waleed bin Talal used to be the most powerful business figure in the whole Middle East. With him arrested the only Saudi economic communication with the rest of the world is dominated by Salman. Secondly, the Vision 2030 has a vital role in the Saudi future economy. Salman’s strategy is to shift the economy from oil-based oligarchy to modern high tech industry seizing assets from the most influential princes, he legitimate himself externally as the only relevant figure within the Kingdom. Saudi officials haven’t been shy about trying to use the arrests to persuade skeptical foreign investors that the country’s notoriously corrupt economy was beginning to change.
In 2018 we can expect more proxy wars between Saudi and Iran, Israel and Iran, Saudi and Qatar and perhaps even Turkey and Iran. Syrian civil war is theoretically won by the Assad, but in reality, Syria will remain a battleground for foreign power due to the lack of economic stability in the former Islamic State’s territories.
Israel and Saudi Arabia tend to become closer in their struggle against Iran. Also, the Iranian regime is building a permanent military presence in Syria. Israel already uses its air force to bomb few facilities in 2017 as a warning to Iran. With a more stable western Syria, Iran has the capacity to directly threaten Israel. That’s why we can expect that Israel to make an alliance with Saudi Arabia who has one of the best military equipment in the world bought from the US.
Despite the fact Saudi Arabia military is very well equipped, the leadership is very poor. So, we can expect Saudi Arabia to lose more battles in Yemen with dangerous consequences at home.
In 2018 we can expect more dynamism in the region due to the fact Islamic State is no longer a ‘state’ and its former territories are more volatile. The relations between Middle Eastern actors will become more volatile in the next year. More internal revolutions are also possible in Iran, Iraq and even Saudi Arabia.
European Union fragmentation
During the refugee crisis, the EU become more politically fragmented. Eastern Europe states were unwilling to receive refugees despite all the EU efforts to pressure them. In the Western Europe refugee crisis polarized the political landscape having an important role in Brexit vote, French, and German elections. Even though, Emmanuel Macron won the presidential election in France, and Merkel won in Germany, they both confronted with a rising right-wing discourse and a polarized electorate which undermine their political legitimacy.
Brexit will accelerate as much as possible. The UK’s goal is to obtain best possible conditions until 2019, which is very unlikely. If the negotiation for Brexit will take longer than 2 years, each EU member state must agree to a new term. The most important goal of the British part is to obtain free access to the common market. This situation put the UK in a very difficult position, basically, London has to negotiate with each EU members individually.
Separatism will become a headline topic in 2018’s Europe. Catalonia and Scotland are the most visible campaigns. The way that Spain will solve its separatist problem will affect all similar movements. Last year Catalonia voted for independence in a non-Constitutional referendum. What we see in Spain is a paradigm shift from Constitutional authority to people’s direct authority. What does it mean? People no longer see their governments and constitutions as an ultimate form of authority. We can see that a lot of Catalan people who were against the independence, expressed their willingness to be able to vote. Spanish police intervened in the electoral process in Catalonia in order to apply the constitution but also undermined the Catalans’ freedom of expression. Here’s come the paradigm shift, people no longer care about the Constitution they tend to prefer a more direct form of democracy which includes social media activism, protests and even vote for independence.
In 2018, we can expect more political debates in Europe and more polarization but I think that the EU officials and perhaps state governments will shift their paradigm based on hierarchy and bureaucracy approaching a more direct form of democracy as people wish.
From an economic perspective, we will see huge transformation due to the adoption of new technologies that we will discuss later. The Artificial Intelligence and the Blockchain will dramatically change the European economy making people more independent and also becoming great opportunities for states such as Germany who already adopted automatization in the industry to recover their production advantage they used to have before the 1990s. The automatization will be adopted in more industries in Europe maybe faster than anywhere else in the world due to the fact that workforce in Europe is very expensive and immigration policies are under very polarized political debates. So, robots will solve both an economical and a political issue in Europe.
Africa
We already can see an unprecedented economic growth in Africa. The political risk of African countries will remain high, but new technologies especially blockchain will solve a lot of African economic and social problems. Blockchain can be used as a banking system and a contract form what we call ‘smart contract’. Why is this important in Africa and parts of the Middle East? Because in these states many people do not have access to a banking system or to justice. Blockchain can help entrepreneurs from these countries to avoid bureaucracy, unhealthy banking system and most importantly to use smart contracts in order to preserve their property rights. In these countries it is very common that government to seize your property, that’s why investors are avoiding to do businesses or even finance businesses due to the high risk of losing money. Blockchain-based smart contracts can simply solve the problem making impossible for a government to seize a property in form of a cryptocurrency such as Bitcoin.
China will have a role in some of the African states such as Angola and Nigeria. With huge oil reserve, these two states will become more attractive for foreign investments mostly from China who will try to dominate. We already discussed Xi consolidation of power, I expect a more active Chinese foreign policy in 2018 and we will feel this mostly in those two African nations.
With a less British influence in Europe due to the lack power of negotiation, France will dominate EU-African relations. With a considerable military presence in Mali, Mauritania, Burkina Faso, Niger, and Chad — as part of Operation Burkhane. (Based in Chad, the operation aims at disrupting potential militants threat across the Sahel region of the continent.), France will gain more geopolitical influence in its former colonies in Africa. Without the UK, France is the only EU member who possesses nuclear weapons and military capabilities to intervene overseas independently of NATO. We can expect a more involvement of Paris in former French colonies in Africa with a positive impact in my opinion. Also, this situation will make France a more relevant geopolitical partner for Washington.
Russia
Moscow will continue to act according to its immediate interests. From an economic perspective, Russia’s high dependency on energy exports plus sanctions against them will make them shift its foreign policy. I expect a more openness to compromises from president Putin.
2018 is an electoral year in Russia, despite the fact Putin dominated the political landscape, there are more and more voices who speak against the current status quo. Putin immediate goal is to satisfy its people’s economic needs, including here millennials who are the most challenging voices against the current regime. Young Russians weren’t able to have a political alternative for Putin’s regime during their lifetime. Most of them are not against Putin itself but they are against the idea of only one political option.
I expect Putin to shift its political approach a little bit allowing a serious opposition for both reasons, first to handle its domestic unrest and second to show to the west that Russia is not a dictatorship.
On foreign policy, Russia will try to approach the US using their successful cooperation in fighting against the Islamic State as a starting point. It is unlikely that EU will recognize Crimea annexation, but this is another issue that split Europe between West and East. Western European nations such as France, Germany, and Italy are willing to make more concession towards Russia than Poland, Romania, and the Baltic States. These 5 Eastern European states will remain highly pro-NATO and pro-US. Meanwhile, Paris, Rome, and Berlin will have to rethink their approach toward Russia due to their economic interests.
World-changing technologies
In my view, this is the most important topic of the geopolitical landscape of 2018. We assist at a revolution similar to the industrial revolution. As we know the industrial revolution shaped the geopolitics in the world, changing the nature of the geopolitical power itself. Those who understood and adopted the new means of productions become superpowers during 18, 19 and 20th centuries. The same thing is happening now but the states are much less relevant than before.
Blockchain
The blockchain is a decentralized network of millions of computers around the world. This technology solves 4 problems:
a. Fast and secure value transfer;
b. Eliminating third-party trust;
c. Transparency;
d. Property rights.
Regarding value transfer, the banking system is very outdated and complex making money transfer a problem for businesses around the globe. Also, its cyber security is constantly threatened by hackers. A decentralized network of computers solve these problems making very easy to transfer money, faster with fewer fees directly from person A to person B without dozens of banks in between. Also, because is a network each transaction must be validated by all participants computers, what we call miners. Those miners are paid in Bitcoin, Ethereum, and other cryptocurrencies. In order to be able to corrupt a single transaction, you have to access and modify the entire history of transactions, which are millions. Each node has in it the entire blockchain history. From the cybersecurity perspective, it is more secure to transfer money via blockchain than traditional centralized banks.
Regarding third-party trust, this is the first time in human history that two persons are no longer need a third party to legitimate an agreement. A cryptocurrency such a Bitcoin is divided into 100 subdivisions. Each division is unique and each one can be programmed to execute a specific function. That means we can make an electronic contract Smart Contract that it is executed automatically if both parties are respecting their words in delivering value in form of products or services. For example you no longer need a notary or paper to validate a contract. The same technology can be applied to the voting system, healthcare payments, and many other domains making them more transparent and accessible.
Transparency is based on the fact that blockchain is decentralized and public. In other words there no company who control the transaction and everyone can see them in real time. Here is the website: Bitcoin Block Explorer — Blockchain
This technology it appears to be more trustful than banks just because banks are closed-door institutions and blockchain is real-time accessible and visible.
Businesses around the world are starting to fund themselves using smart contracts. Currently, there are more than 900 different cryptocurrencies similar or better in technology than Bitcoin. They use tokens or coins to obtain funds for their businesses based on smart contracts. As an investor, it is more appealing to give money in exchange for a token and follow the development in real time and as an entrepreneur, it is more viable to build smart contract that is available worldwide without any institutional regulations.
The Right of Property is the key to the free market. Unfortunately a lot of countries still not guarantee this right to their citizens. When in a country are many chances that the government to seize your assets investors avoid to invest in it. However, there are many countries where the property rights are only socially recognized. For example, a man who has a house and a small land in Afghanistan. He can have a paper from 1980 who says this is his property but with a lot of regime changes and corruption, there is no clear procedure that guarantees his ownership. Blockchain-based assets cannot be seized by any government.
Of course, a lot of people does not have access to the internet, but we can see a growing internet access in Africa and the Middle East among the young population. The Arab Spring is a good example of how willing young people are to adopt and use new technologies to pursue their own goals.
The Artificial Intelligence is another key factor that will shift the world in the next years. The AI is more and more presents in production, industry and people’s lives in form of personal virtual assistants such as Siri or Alexa. Combining these two technologies, the people will become more powerful in controlling their information and their assets. That’s why I consider the state power is decreasing and that’s why I see a paradigm shift from the state authority to local and individual authority.
In 2018, I expect that blockchain to be a headline topic. The same for AI which already was in 2017. These two technologies are already started to gain attention. Banks from many countries such as Japan, South Korea, China or Australia are implementing cryptocurrency payments. The reason is to remain relevant among their customers. Big hedge funds such as Goldman Sachs are already buying Bitcoin and I expect them to do the same with other cryptocurrencies such as Ethereum and Ripple. The reason is that we can expect a wealth transfer from banks to individual ownership based on the blockchain.
In conclusion, the most important aspect of the next year to follow is the authority paradigm shift. This it can be observed in separatist movements, protests, wealth transfer to the blockchain and more entrepreneurial innovation around the globe.
